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Investment Opportunities That Can Withstand Economic Slowdown

Posted by IPS Commercial on April 5, 2020
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Investing Advice – What Type of Investment Can Withstand Economic Slowdown?

The global market is currently facing volatility due to the implications of COVID-19 causing today’s investors to panic. But some investors believe that now is the best time to get into investing – now is the perfect time to buy.  

This is not the first and definitely will not be the last economic crisis the world will experience, and while the negative effects in the global market are huge during this time, it can also be good opportunity to get your investment strategy in check.

Historically, markets have always bounced back from an economic crisis and those with foresight will invest now for long-term gains and great returns.

There is a tremendous amount of uncertainty in various markets, thus, no investment is completely safe. But which type of investment is a reliable choice and most likely to survive from economic collapse? Let us look at the following most common investment options:

1. Bonds

  • When faced with a crisis, some opt to divest their equities and invest in bonds. This poses an even higher risk because of market volatility and credit risk. In such a volatile situation, bond issuers may default or declare bankruptcy. This is particularly true for companies that are financially shaky.

2. Investment Bonds 

  • Investment funds come in different forms, such as mutual funds, equity funds, balanced funds, and money market placements. These are complex investment vehicles that are a combination of stocks, bonds, and other investment means. With a very volatile market, the risk for default or bankruptcy in a time of crisis is likewise high.

3. Stocks 

  • The markets have entered a period of extreme volatility with the COVID-19 pandemic. The stock market plummeted so sharply that some companies suspended trading of stocks. The risks are extraordinarily higher because no one really knows exactly what is going on with the economy right now. Some experts advise to wait it out until a clearer picture of the situation emerges.

4. Investing in Banks

  • Though bank products are safe in a time of crisis, savings accounts earn very modest interest. The more complex bank products involve much larger amounts and utmost confidence on the services of the investment counselors. A disadvantage of bank products, however, is that they are more strongly affected by inflation.

5. Life Investments

  • Life insurance and pre-need plans are sound investments to prepare oneself for future needs. However, these investment instruments offer a one-time benefit; policy holders receive benefit when the policy matures. But in a time of crisis, companies have been known to go bankrupt or liquid. When the policy holders can no longer pay their dues because of a global crisis such as COVID-19, the inflow of cash to honor maturities and terminations will eventually stop.

6. Real Estate

  • Generally, real estate is a great long-term investment because the value is highly likely to increase overtime and may be less sensitive to volatility. And since the asset is real and permanent, it can generate ongoing passive income. During an economic crisis, real estate can withstand price pressure and remain stable.

Obviously, all investments face risks. In the face of a calamity or uncertainty, the best venture to take is one that involves the least risk and the greatest prospect for price stability. As pointed out earlier, real estate investing is the most attractive from all standpoints.

But how does one go about choosing which real estate investment to make, especially the first-time investors? Here are some tips to remember:

✓ Location

  • Choose projects or properties located near infrastructures, business districts, schools, malls, and markets as these projects will command higher rental yields and capital appreciation.

✓ Rental Properties

  • This investment is as old as the practice of land ownership – a property being leased or rented out to a tenant. When evaluating properties, focus on return potential. The demand for rental properties like condominiums, apartments, villas, has been growing and will continue to do so.

✓ Credible Developer

  • Choose a real estate project from a developer that has a solid financial standing, credibility, reputation, track record, after sales service and commitment to buyers.

✓ Pre-selling vs RFO

  • With a reliable developer, the pre-selling stage of a development project is the best time because then prices are still low and offers of flexible payment terms and special promos are available. But for investors wanting to buy ready-for-occupancy (RFO) units, the best time is now, while the economy is slow, as developers are more inclined to offer promos.

Whether it is pre-selling or RFO unit that one is looking for, the current economic slowdown can open up a great opportunities for advantageous buying.

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